14 Questions
What is the ultimate goal of a trustee's duty to invest?
To make the trust assets productive
What is the standard of care required of a trustee in respect of the duty to invest trust funds?
Higher than that laid down in Speight v Gaunt
What is the duty of a trustee in relation to the investment of trust funds, according to Learoyd v Whiteley?
To take such care as an ordinary prudent man would take if he were minded to make an investment for other people for whom he felt morally obliged to provide
What is the consequence of a trustee making a mere error in investing trust funds, according to Re Chapman?
They will not be liable for breach of trust
What does 'to invest' mean, according to Re Wragg?
To employ money in the purchase of anything from which interest or profit is expected and which property is purchased in order to be held for the sake of the income which it will yield
What does the Trustee Act Barbados provide in relation to a trustee's power of investment?
A trustee may invest property in his hands in any manner as prescribed in the Schedule and may from time to time vary those investments
According to the Trustee Act Barbados, what should a trustee have regard to when exercising their powers of investment?
The need for diversification of investments of the trust
What is the main criticism of Warren Buffet's investment approach?
He does not consider the entire portfolio
According to the case of Cowan v Scargill, what should trustees prioritize when making investment decisions?
The best financial returns for the beneficiaries
What is the duty of trustees in relation to distribution of the trust fund?
To distribute according to the trust instrument
What can trustees do to safeguard themselves against liability for wrongful distribution?
Apply to the court for directions
What is the purpose of a 'Benjamin' Order?
To authorize distribution to beneficiaries
According to the case of Howe v Earl of Dartmouth, what duty do trustees have?
To act fairly between the beneficiaries
What is the consequence of trustees handing over the trust property to the wrong persons?
They may be personally liable to the beneficiaries
Study Notes
Continuing Obligations
The Duty to Invest
- Trustees are under a duty to make trust assets productive by investing them in accordance with the trust provisions or statute.
- Types of investments include bank deposits, shares, debentures, government securities, and unit trusts.
- The standard of care for investing trust funds is higher than that in Speight v Gaunt.
- A trustee should conduct the business of the trust as an ordinary prudent man of business would conduct his own (Re Whiteley).
- The duty is to take such care as an ordinary prudent man would take if he were minded to make an investment for others (Learoyd v Whiteley).
- A trustee will not be liable for breach of trust for mere error (Re Chapman).
- "To invest" means to employ money in the purchase of something from which interest or profit is expected (Re Wragg).
- The Trustee Act Barbados allows trustees to invest property in any manner prescribed in the Schedule and to vary those investments (S.3).
- The portfolio theory emphasizes the risk of the entire portfolio rather than individual investments (Nestlé v NWB).
- Warren Buffet suggests that trustees should invest in good investments and avoid high-risk ones.
- Trustees must have regard to diversification of investments and act in the best interests of the beneficiaries (S.4(1) Trustee Act Barbados).
- Trustees should put aside social and political objectives when making investment decisions (Cowan v Scargill).
- Trustees have a basic duty to act fairly between the beneficiaries (Howe v Earl of Dartmouth).
- Trustees must seek the best financial interests of the beneficiaries without regard to underlying ethical implications (Buttle v Saunders).
- Non-financial matters may be considered in certain circumstances (Harries v The Church of England Commissioners).
The Duty to Distribute
- Trustees have a duty to distribute the income and capital of the trust fund in accordance with the trust instrument.
- If they hand over the trust property to the wrong persons, they may be personally liable to the beneficiaries for the wrongful distribution (Eaves v Hickson).
- Trustees may safeguard themselves against liability for wrongful distribution by:
- Applying to the court for directions (Re Londonderry's Settlement).
- Paying into court where the beneficiaries cannot be traced (Re Williams Settlement).
- Distributing by advertisement, enabling trustees and personal representatives to advertise for claimants (S.31 Trustee Act Barbados).
- Obtaining a "Benjamin" Order, a court order authorizing distribution to the beneficiaries.
Learn about the duties of trustees, including the duty to invest trust assets and the standard of care required. Understand the types of investments and the relevant case laws.
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